A Call for Defensive Legislation

By: Brady Bizarro, Esq.

On April 5th, the House of Representatives passed the Self-Insurance Protection Act (SIPA; H.R. 1304) by a vote of 400 to 16. This was the third iteration of this bill, originally introduced at the suggestion of the Self-Insurance Institute of America (“SIIA”). This legislation is very important for our industry because it blocks federal efforts to regulate small stop-loss plans as health insurance by excluding the plans from the federal definition of “health insurance coverage.” If you were struggling to think of a federal law which redefines stop-loss as health insurance, that is okay. There is no such federal law on the books. Indeed, there has been no legislative proposal at the federal level to redefine stop-loss insurance in this way. This was defensive legislation, designed to ensure that federal regulators do not try to redefine stop-loss insurance. State legislatures around the country should take notice of this approach before it’s too late.

At the state level, we have already seen numerous efforts (often successful) at redefining stop-loss insurance or placing restrictions on coverage. Why are states pushing this kind of legislation? One development that added fuel to the fire was the U.S. Department of Labor’s Technical Release on November 6, 2014. It expressed the opinion that states should not be concerned that stop-loss regulation restricting policies based on attachment points would be preempted by the Employee Retirement Income Security Act (“ERISA”). Since that time, we have seen efforts to restrict stop-loss coverage in California, the District of Columbia, Maryland, New York, New Mexico, Florida, Delaware, Washington, Connecticut, and Utah.

In states where restrictions have not been put in place, or where the restrictions are not severe, employers and insurers alike should be pushing for defensive legislation to reaffirm that stop-loss insurance is not health insurance.